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tv   Bloomberg Daybreak Americas  Bloomberg  May 16, 2018 7:00am-9:00am EDT

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jeopardy. north korea cancels talks with south korea, and says it may not continue with the u.s. u.s. treasury bonds move higher than in seven years, with some people warning it is getting higher still. and finally paying attention. , talk about writing down sovereign debt is another matter altogether. welcome to "bloomberg daybreak." i'm here with julia chatterley. alix is off today. you see the pressure we saw yet.s. equity markets, and futures in the green are very minor. we will continue to watch that over the coming couple of hours. obviously the shift we saw in the rates market very much the
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focus. tenure rates the highest since -- 10 year rates the highest since 2011. united states not seeing all the limelight in terms of price action. we have the stoxx europe in the green. all sorts of headlines. potential debt right now for the italian government. think greece when you think of that. it, right now we've got it. thank mario draghi for keeping rates where they are right now. higheree 10 year yields by some 10 basis points. very quickly, want to show you more broadly what is happening last five days in emerging-market currencies. again was the dollar strength we are seeing off the back of rising u.s. rates, the epicenter of some of the trouble remains the emerging markets. right at the bottom, the
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underperformer, the argentinian peso. the russian ruble gaining. what do you think of that? david: who had a thought -- who would have thought? we will be at macy's for the beginning of retail week. later we will speak to justin trudeau. trumpter, president uzbekistan in a working lunch. we want to start with this writer -- with this rather dramatic announcement yesterday saying theyorea might not go forward with a summit. u.s. is trying to force us into a corner to abandon --
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to force our unilateral nuclear no longert, we will be interested in such dialogue and cannot consider -- cannot but reconsider our proceeding to summit.-u.s. " basicallynt trump has heralded this meeting is a victory and himself as a peacemaker. this could be a sign that north korea's kim jong-un is taking issue with that and saying, before you declare victory and say you have the upper hand here, that is not on the table for us. john bolton, who is part of the lead with libya and iraq and thesedenuclearization -- disarmament kind of measures, these did not work. i think it changes the tone. with him.pent time
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he was there ambassador to paris at one point. he knows western culture. it really strikes me that we may be underestimating him. >> i think we are, and what they are trying to avoid is the libyan affair. they don't want to trade their nuclear weapons for sanctions. they want a commensurate deal, something they can work on with south korea to build their economy, not just a giveaway. alix: at --julia:, not allowed to be surprised here about the two definitions of disarmament and denuclearization? these guys are saying you ease up on some of the sanctions here. the timing is going to be critical, i don't think anything has changed on that front. >> it doesn't seem like people
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are viewing this is a real camping up of the rhetoric. it is simply trade negotiation. foranyone who is hoping world peace could biot, forget about it. me thatt really struck in their statement they referred specifically to libya. >> it is almost the rhetoric they have gotten from china. there was talk that north korea's nuclear program has imploded in and of itself, so they simply cannot proceed anyway. this could be the united states saying we've got you against a rock or a hard place, so let's push this and see how far we could go. president trump has always said until a deal is reached, we are going to play hardball with them. you see that in the exercises with south korea. julia: and that is what precipitated this, let's be clear. it was the north koreans reacting and not just taking it a further point at this stage.
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ok, 10 year yields highest since 2011. we were noting yesterday morning that i was reacting. >> the interesting question here is why. is this because the u.s. is selling a great deal more debt and how much is going to get absorbed? is this inflation expectations? what is precipitating this, especially given that the real increase started after expected retail sales for april? i want to point out something i thought was fascinating on the bloomberg here. you can see the gap between inflation expectations from the next 30 years and next 10 years. it has completely flattened out. this is not an inflation story. they are pricing in the exact same rate in 10 years as they are in 30 years.
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you are seeing the same thing with the flattening yield curve. that, flat, flat, flat. actually inverted at this point. to me, this is telling. it indicates more of a deficit story and normalization story than anything else. >> i think short-term we are seeing a little bit of inflation. one of the things they got the market spooked yesterday is the spread in prices paid that came with that retail data. there is another subtle see missed, that was the testimony where they wanted more of an acceleration of the balance sheet. he doesn't want him be yes on -- on then't want mbs balance sheet at all, talking about having the u.s. balance sheet in a timeframe we are not sure of. that kind of supply with a deficit coming on board, that makes the long end of the curve not really that attractive. david: that is music to the year
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of republicans on the hill. they thought the balance sheet was too big. whoa, whoa, whoa. though? they just passed a spending bill that will increase the deficit by $1.5 trillion. i'm just throwing that out there. julia: details, details. [laughter] come on. >> there is a question, does the government currently want that? julia: short-term, medium-term, long-term. what about positioning in the bond market? we have approximately record shorts in the 10 year. everyone was talking about the value there is now in the front end of the curve as well. >> when you're looking at the fed potentially spiking rates up , you have to see the moving in the two-year commensurate with the rate. curvere is a flat yield
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but not an inverted yield curve, that is something the fed does not want. we mentioned it, we do not want to intentionally revert the curve. at some point they were going to have to back off brexit the -- back off or accept the potential of an inverted curve. david: if we are not careful we are going to end up being italy. that is our third story. we know the populist government seems to be coming in over there. that was ok the markets. and theying just fine, said maybe we will ask for a little relief on the debt from the ecb, and it spiked. still on an overall downward slope come up bond market seems to have reacted. even greece didn't go there. >> just to put this in perspective, it is amazing that the 10 year bond yield as an up way more than it is. it indicates that all of this
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fiery rhetoric we are hearing out of italy, people are not viewing it as reality and that this is going to get implemented. it increases the risk because they basically laid out a plan at first the talked about exiting the shared currency, the euro. forgive are saying just the debt. it is fine. david: germany is not going to buy any of this. >> exactly. it is actually illegal in the treaty, the ecb cannot finance sovereign debt. if one of the nations were to default or what to forgive debt, that invalidates the treaty and the central bank is in file he should -- is in violation. just wait for it. ratings agencies starting in august, all of the big ones, come up to rate italy.
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if they all drop them back further, the ecb has got a big problem because now they are holding debt they are technically not allowed to hold. david: vince and lisa, thank you so much. coming up, a spike in 10 year treasury yields boost markets, as we have been talking about. how much higher above that milestone 3% level will decline? pimco's globalth strategist about that. this is bloomberg. >> the hewlett packard
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enterprise greenroom is brought .ou in partnership
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kailey: this is "bloomberg daybreak." drugmaker astrazeneca has been raising cash, and may crestor.rights to burberry is speaking in support to buy back to hundred the million dollars of shares -- $200 million of shares. the new creative director
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unveiled his new collection of september. that is your bloomberg business flash. bonds got the attention of equity investors yesterday as 10 year treasuries moved well above that landmark 3% level. how high will yields go? cohead ofto development, he says it will go higher, but not too much higher. >> yields are going to be somewhere between 3% and maybe 3.5%. targett think that 4% that is out there is realistic. target that is out there is realistic. we think that for a whole range of reasons. we do think that this hiking cycle is already well advanced. six hikes already, another three or for the markets are already technology. david: joining us from london is frieda, pimco's
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global strategist. why is this what you are expecting? >> i think it starts with the fact that we still think we are in a relatively low real interest rate environment due to a number of secular factors like demographic, high debt levels, and as a result we think the fed will probably not be able to hike much by on -- much beyond 3% without having a material impact on the economy. it starts with that as a premise and looks at the two-sided risk to duration over the cycle. whereas we see in the u.s. some overheating risk associated with late cycle fiscal stimulus, we also see a lot of things that could go wrong in the world. we recognize that there's a fair amount of risk where bonds still have quite a bit of value from an insurance perspective.
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david: i want to believe a chart here. basically what it says is when the yield bumps up twice on the upside or downside, it tends to break out after that. he actually thinks it will go to 3.5%. are we going to be closer to this or the 3%, or do you think it will just be back-and-forth? is reallyhink what striking about the yield curve right now is not so much its shape, but the fact that when you look beyond the two-year point basically almost all of the forward pricing is concentrated around the 3% yield level. effectively there is very little term premium. you don't really get any duration risk. you want to see that uncoiling a little bit. you want to see some volatility coming back into the market because the market is not really pricing any risk to duration.
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is it likely in that context you could see a move to 3.5%? , would say it is pretty likely but we are already getting to a point where we can start to see value in the long end of the curve over the cycle. just the fact that you don't get compensated for taking 10 year risk, why not just go to the five-year part of the curve? julia: as you pointed out, obviously if you can take risk at the front end, even at the two-year part of the curve, why would you risk buying at the 10 years when you are not being compensated for the additional risk? what level does that bring us back to if we start to see more buying as far as the five-year is concerned? guest: i would kind of look at it like this. if the immediate concern is, again, this light cycle fiscal stimulus and the fact that you've got inflation coming up from remarkably low levels to what is more or less consistent , and whether or not
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the fed will allow some kind of overshoot to happen, which the fed seems willing to countenance , what does that mean exactly? does that mean a little bit of overshoot, little bit more of an overshoot? there's quite a bit of uncertainty because we haven't been here for years. the point we would emphasize is there's quite a bit of value to having insurance, and part because the market doesn't really seem to be pricing much anyway inflation risk. even though we don't really think we are going to have a serious inflation problem in the u.s. emily think insurance is very cheap to buy. that insurance is very cheap to buy. have unprecedented level of people selling treasuries in the five-year. at one point -- at what point do we get some sort of capitulation? guest: what i find interesting
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is that if you look at the tightening in financial conditions over the last three basically the largest tightening in u.s. financial condition since 2011. the fact it is starting from such an easy starting point i think is probably overshadowed how extreme the tightening has been. normally what you would expect after a tightening and financial conditions like that you start to get response from the data. that is probably the immediate challenge to short speculative interest in the market. move: there's been a real in italy, particularly in the short end. just looking in the two-year, it has really spiked up, i barely in response to the news they might be considering asking the ecb for some debt forgiveness. what do you make of the italian bond situation? our view is you don't
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really get compensated for holding italian bond risks at this stage. we are more neutral than anything. you kind of have a tension between, on the one hand, a political backdrop that is sort of threatening this loosening, which you know the european establishment will not countenance. largeainst that, you have credit accounts in surplus, so the government can now find itself through the private sector. i think we are just getting a little bit of a have got more than anything. italianern is once growth starts to roll over, if we have a more populist government trying to run larger fiscal deficits, i think there will be more of a backlash from the market at this point. julia: when you talk about --david: when you talk about italian bonds, what sort of role does the ecb play? expecti think we would the current qe program to finish by the end of the year and the anchoring will be around low
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rates policy. there will continue to be re-investments. were concerned about tightening in broad conditions, they might extend the maturity of those investments. i think it is really hard to it is more specific than if there were just in italy situation. gene will be staying with us. tune in to bloomberg television's afternoon for an the fede interview with president. we will talk about what it is like to have warren buffett as your investor. that is coming up next. this is bloomberg.
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♪ david: the biggest issue in credit card is a company you may not know. i talked with synchrony and asked hero how she found out that warren buffett had become an investor. >> we learned when the market learned, actually. we did not know ahead of time, and we were, of course, extra nearly excited about the fact that they took the opportunity to invest in us. they are looking at the stability of the business, the fact that we have been able to grow. i think the fact that we are investing for the future. i think they see that we were giving good returns to our shareholders, so i think that is the reason, hopefully.
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i have not had a personal conversation with warren about the investment, but obviously very excited to have him as shareholder. david: that was synchrony financial's ceo. you can watch more of the interview tonight on "big decisions" 9:30 p.m. eastern time. julia: coming up, turkish lira selloff after the bank vowed to sel -- vowed to step in. that is coming right up. this is bloomberg. ♪ mom, dad, can we talk?
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sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one.
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seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. ♪ julia: this is "bloomberg daybreak." we are not really getting in the indication of direction -- in u.s.any indication
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10 year after hitting the highest level since 2011 in the session yesterday amid a global selloff. we saw stocks, bonds, and gold under pressure as well. focus, and ich in will give you a look at that right now. the italian 10 year also in focus, as you can see, high by almost 11 basis points. all sorts of alarming signals coming out. prime minister position sharing, you name it, we have it. the euro under a bit of pressure, lower by 4/10 of 1%. gold trading at this moment broke below the 200 day moving average, under the $1300 level.
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really nowhere in this session you could hide yesterday. can we turn this around today? at what isa look going on inside the business world, we have kailey leinz. kailey: north korea putting a damper on optimism for a summit with president trump. regime isn's threatening to cancel the meeting, criticizing the u.s. for "a one-sided demand that makes north korea give up its nuclear weapons." they canceled talks with south korea over its nuclear -- over his military drills with the u.s. u.k. prime minister theresa may has set a deadline for her cabinet to agree on a common stance for brexit. may's cabinet is deeply split on how britain's policy with the eu should change. the international energy agency has cut its forecast for global oil demand, protecting the highest prices in three years will take its toll.
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inventories are below average for the first time since 2014. global news 24 hours a day, on air and on tictoc, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. david: thanks so much. turkey's president erdogan was in london yesterday, and it gave an exclusive interview to our colleague guy johnson, and which he said he would to play a larger role in setting monetary policy for turkey. thank you so much for being on the program. ,e know how the world reacted but the lira moved against a record low to the dollar. was it a surprise to people in turkey? guest: within turkey it is actually the market reaction we have been looking at. lowlira has had the record against the dollar, and again, the euro as well. we also sell the yield on turkey's 10 year government
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bonds hit a high. today again the lira hit a record low against the dollar, but the central bank came out with a statement and said that it was multi-market reaction and isld take necessary steps not all necessary. recovered, and this was the market reading this is a signal that the central bank may raise rates, possibly in an emergency meeting. what we know now is that the central bank's meeting was erdogan. it was tothought discuss interest rates ahead of a possible measure, but we've thattold by an official this isn't a meeting on rates,
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and perhaps is to talk a current deal with iran instead. the lira has been losing its gains on that. the president has said something about that. mr. erdogan does not like that idea at all. it is no secret that president erdogan doesn't like high rates one bit, but investors say the central bank is going to be forced to raise rates, and they are expecting a significant rate hike, at least 200 basis points, in order to curb inflation and the widening current account deficit. of course, also forced the lira. markets are really focusing on what the central bank is going to do, and it needs to in-store -- needs to restore investor confidence. david: thank you so much. we are on the watch from
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the signal, the presidential signal. geoff dennis, ubs securities isrging market strategist, an with us. >> this is a very bad time for there to be uncertainty. we have certain currencies coming from events in the u.s., so it is putting pressure on turkey. they may be forced to raise interest rates just to try to protect the lira, i think what has -- i think one has to put this in global context as well. as global conditions start to improve, some of that pressure will come off turkey. it is a bit of a perfect storm, unfortunately. julia: how do you view turkey
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more broadly? we look at this as sort of a , particularly in a u.s. raising rates environment or it even dollar strength environment. more broadly, what do you think of the story here? >> we think turkey has got some .f the worst fundamentals as your correspondence head, you've got a big deficit that has been widening. is financed by short-term capital flows, not long-term. -- thisve got represents one of the challenges. when conditions globally are good, everyone pours into turkey. the market is cheap, the economy doing relatively well, but as soon as the target flow is out, turkey seems to be the one with the weakest fundamentals. i think he will have to put this confusion over monetary policy
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iscontext as well with what challenging the global environment recently. david: let's talk about that broader market. thatl pay chart up here shows what is going on with emerging-market currencies overall. it is really testing the 200 day moving average this point. what is going on with moving s?rket turkey andsay that argentina are more victims of self-inflicted wounds am aware as with the rest of the asset at a, it has been in usual time when you just have had the sharpest tightening in conditions in seven years. the latter tends to create some natural indigestion in an
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environment where i would say asset prices in emerging markets are certainly not expensive, and in currency space in particular, look reasonably cheap. does it create some challenges? yes, definitely. it creates restraints on their ability to use policies, convert growth, and that is probably the strongest impact. there's also some natural contagion from these worse credits onto the better credit, which we actually think is a good thing because it gives us an opportunity to take advantage of what we think our areocations -- we think dislocations on a relatively cheap asset. dropping tourrency the weakest it's been since october 2015, and yet you look at this story has a opportunity. >> yes, we definitely do see opportunity in indonesia.
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if it as we assume these global conditions to begin to improve from the middle of the year , as some of the conditions ease in the u.s.. we think the dollar starts to go down again and bond yields begin to settle to close to current ly will dot initial very well indeed. a much milder level come a reflects to a certain extent the concerns that are in turkey. meanwhile, with respect to indonesia, they are probably going to be forced to raise .nterest rates to board we do see this is ultimately a buying opportunity. david: gene, as there is some
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strain on the global system, it seems to really sure that countries within the emerging markets pretty directly. turkeylook at argentina, that to someia, is extent what investors are taking a look at that they get a little nervous? reporter: i would say that, as just that, the starting point is we compared the situation today to where we were in 2013, and the situation looks far better. distinguishing between current i think isicit natural in an environment when u.s. rates are rising, but i also think you kind of have to look little bit on that headline number. one good example of that is turkey, where current account deficit has been widening steadily, but it seems to be of access in not
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demand, but the goal reports. what does it take to deal with that? it takes monetary policy action. that seems to be a reasonably slow bar in the case of turkey. we very much agree with jeff in terms of the broader situation in emerging markets. otherwise the situation looks pretty good. julia: there's always and overshoot. when there's border alarm and these sentiments, it is always taken too seriously. where is the opportunity, then, if come a given all the assumptions jeff was just making wast -- assumptions geoff , where is the opportunity in he and now -- in
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em now? firstly, it is more difficult if it is purely a beta story. if we are waiting for the dollars to stop rallying and the treasury to selloff. that is more challenging because you are making a call on completely external variables but just very hard to call. this situation is i think a little different because the you see aoint is number of idiosyncratic shots. you see sanctions in russia, elections in a number of countries. those event risks offer opportunities to buy cheap assets because people get scared and for the event. mexico is a good example. brazil will be one to watch for over the course of the next six months. argentina, self-inflicted error now going for an imf program that will get over an internal . all of those offering they've
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-- offer idiosyncratic possibilities that don't require treasury yields to talk about. david: great to have both of you with us today. thank you so much for your time. raisingp, softbank eyes another $1.2 million. "bloomberg surveillance" can be heard all across the united states on sirius xm radio. live from new york, this is bloomberg. >> first word is brought to you by a scene -- by athene. we see you going places you've never dreamt of. we are ahtene, and we dream to do more. more.
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♪ kailey: this is "bloomberg daybreak." i'm kailey leinz.
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up, nathan sheets, pgim's chief economist. david: softbank takes steps to raise another $100 billion, then slicing the apple, institutional investors haven't been this on apple on optic -- since two dozen eight. since 2008. julia: jason kelly joins us now, bloomberg's new york bureau chief. >> he has -- softbank comes but
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in almost every single conversation you have a about venture capital or private equity just because of its sheer size. the idea they are going to but another $100 billion into the market is pretty remarkable. is sort ofo notable where they put their money so far, and also where the money has come from. it was a fairly limited pool initially. this may widen the aperture of it. david: including saudi arabia. that's right. any big deal around the world, the name softbank comes up. >> one thing we have to mention as part of the reason the fund -- they invoke think it, justid
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feel it. f's because they provide one of the only real windows into how big investors are thinking. most, broadly, was cut the and sold off the most since 2008 to the tune of 153 million shares in the first three quarters of the year. .hese are big names david: but you know who is buying them? warren buffett. he's always said you buy when other people are selling. he was saying at the annual meeting, we love apple, the whole ecosystem. that perhaps a way berkshire hathaway has become the third-largest holder of apple -- berkshire hathaway has become the third-largest holder of apple and growing.
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the third story is a lot -- is about the carolina panthers. this was one of the most watch stories in sports. we talk about a lot of guys going in and buying teams. ighlyranchises are h coveted. it is waning a little bit and but $2.3re down, billion is a record for an nfl franchise. to be fought it was going -- people thought it was going to be a big number, but this is even bigger than i thought. david: the biggest question for me, does it make money as an ongoing concern or an asset play? higherhe value will be even if i am not making money day after day. >> right. ego play for sure.
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that is certain. we even have a lot of people buying sports franchises. apollo,rd, a partner at is behind the new l.a. football , ab in los angeles competitor to the galaxy. david: david blitzer has been an investor. a lot of these people. >> the philadelphia 76ers. they made a little run into the playoffs. david: i have a football team in england. julia: yes, they do. the price of ego is pretty high in this case. er this was a cash deal tepp made. i've talked to a lot of guys over the years about why they did it. yes, it is really fun. if you're a kid growing up, the idea of owning your hometown team, or any team, that is like a ball or alert. -- a baller alert.
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david: and did you see that price tag? all of the people who've already bought are feeling pretty good about their investment now. >> and especially media rights play a huge piece of this. david: the hope is those actually grow because of all the streaming. they are putting up some real dollars right now. like the dodgers was the deal that really brought in a lot of big bidders. it was a bit of a poor sale, went to guggenheim. it has been very successful. the dodgers have been an even better team. people want to buy a winner, too. the panthers are already a good team. we will see how they do. david: the main point is it is sports, so enough said. jason, thank you so much for joining us today.
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coming up, the sweet cornflakes are about to get scarcer in venezuela as kellogg pulls out of the country. julia: if you have a bloomberg terminal, check out tv . click onhat is online, any of the charts we've discussed throughout the show, and interact with us directly. tv on your terminal. from new york, this is bloomberg.
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♪ david: we are both watching this. this is venezuela. and saysas pulled out they cannot do business down there anymore -- kellogg has pulled out and says they cannot do business down there anymore. it is an indication of how badly things are going down there. of folks have
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already pulled out. i guess the point is the inflation rate. this is what we were talking about before the show today. the current inflation rate in venezuela is 18,000%. we know there is a broader crisis. david: the fundamental problem is their main source of revenue is oil, and their production has gone down really precipitously. we just got new report out, and it has just gone down and down. gone downe it has since 2013, and keeps going at an increasing pace, and frankly going back to chavez. chavez thought we should take this down, and they have destroyed the oil fields, not invested them. julia: we are going to talk about this in more detail. -- otherphillips
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companies now are looking at their assets. bad isstion now is how this situation as far as oil assets in the country going to go? david: and it is a tragedy for the people living down there. coming up, we talk with nathan pgm's chief economist, about what is going on with that u.s. treasury. this is bloomberg.
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. . mom, dad, can we talk?
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sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one.
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seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. . . david: diplomatic jeopardy.
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north korea cancels high level talks with south korea and says talks with president trump may not go forward if the u.s. holds exercises with south korea. the yield on 10-year treasury bonds is highest in seven years. some people saying it's headed higher still. finally paying attention. in italy a populist government is one thing but talk of bringing down sovereign debt is a matter different altogether. they sell bonds. julia: macy's, we've been waiting for this morning. looking at the first quarter adjusted e.p.s. at 42 wents -- 42 cents. the estimate was 37 cents, significant beat there. icense comparisons, plus 4.2%. expecting 1.2%. and seeing a share $3.95 and
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were seeing $3.75. as far as the adjusted e.p.s. is concerned they've raided their guidance. we're looking at how it performed premarket and higher by some 8.3%. obviously it's moving around a little bit here but just in terms of the numbers it's about the details here. what do they say about the weather effect and we've heard higher transportation costs as well from some of the other retailers in the sector and we know it's an ongoing story to burst growth. david: to keep making money they're changing their direction. the notion they had increased sales but at the same time really improved their earnings. it looks like it gives them a little bit of breathing space to move forward with some of the changes they need to make. julia: absolutely. the cost of investment whether it's pressuring margins and the goals of returning to competitive sales for the fiscal year, we're seeing gains today. david: good news for retail. julia: it looks like it. a look at markets now?
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i'm untrained. right now the futures tilting slightly to the downside but very slight. plenty of time to go until we see the open of the markets today. higher by one basis points. we had come back from the 309 level in the 10-year we saw yesterday at the close and that very much taking investors' focus higher and the move lower and we saw weaker sessions for some three weeks in fact. europe relatively unchanged. the focus remained what we're seeing in italy with the stock market down 2%, 10 basis points earlier and now 12 basis points higher for the italian 10-year. all sorts of headlines as we've been discussing already, potential debt right down to role share arrangements from the prime minister's role and two individuals and the two parties we know will be a populist government the question is what shape will the balance be. the headlines on that one, david. david: we find out what's going on outside the business world with first word news.
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kailey: north korea is talking about walking away with next month's summit and criticizes the u.s. with a one-sided demand for north korea to give up its nuclear weapons. earlier north korea canceled talk with south korea over the military drills with the u.s. and julia, as you mentioned in italy, talks aimed at forming a populist government are said to be winding up. the head of the migrant lead says negotiations with the anti-establishment five star movement are in the final stretch. according to the italian huffington post, the two parties may demand the european central bank write off $300 million in debt. the international industry agency cut the forecast for global oil demand and predicts the highest prices in three years will take its toll. oil up 17% this year. the agency says inventories are below average for the first time since 2014. global news 24 hours a day on air and on twitter powered by more than 2,700 journalists and
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analysts in more than 120 countries, i'm kailey lyons, this is bloomberg. david? david: thanks very much. we watched as the yield on the 10-year treasury bond almost reached the 3.1% and the highest since july of 2011 and the equity markets reacted with the s&p losing .7% and asked how much further the 10-year yield is likely to go and what it means for equities and other assets. to find answers we welcome in andrew sheets, the income chief economist and our bloomberg columnist romain bostic and i want to put up a chart i borrowed and shows what's going on with the yield and was the highest since 2011 and spiked in 2013 but not as much. this is his point, every time it's had two bumpups against or down below a resistance point it's broken out. this has been two times now so he's saying it's pointing towards 3.5. does that make sense to you?
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>> i think the background is the u.s. economy is performing better as the u.s. economy performs better, inflation is rising and the federal reserve is gradually normalizing policy. i think what we're seeing is the 10-year treasury return to more historically normal kinds of ranges. so what i see happening is a normalization of the long-term treasury rate relative to inflation expectations and growth outlook and could it rise a the bit more? possibly. nathan: i do think there are structural factors that mean long term rates in this cycle are lower than they were in previous cycles but exactly where the peak is i think is an open issue and i could be out a little higher. david: we had retail sales numbers and we heard from the nominated new vice chair and he thinks the balance sheet is too
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big and he'd like to get out of the mortgage backing business altogether. is that pushing the yields higher and is that a form of the normalization, is rich saying we'll normalize faster than we thought? nathan: the normalization of the balance sheet certainly is part of the normalization that i'm referring to. i would think that the fed reducing the size of its balance sheet again gradually, incrementally is putting some mild upward pressure on treasury yields but not significant. and i wouldn't expect the fed to alter the plan about its balance sheet that have been announced. i think they wanted a pressed out balance sheet prucks and -- reduction and they want that thing as close to possible on auto pilot as they can engineer. julia: so many comments that this has been the highest rate since 2011 and talking about a
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eight-point basis point move in a session and risk asset and risk sentiment as far as investors are concerned remains fragile and they react to it. >> it's about how they'll digest this, rate normalization and the inflation picture and stronger labor market all means the rates go up and the question is can the market handle it? the seven basis points you talked about yesterday, it's more of a 10 basis point swing when you look from the lows to the highs. that was a dramatic move when you think about when we closed above 3% the last three or four times this year, three times this year, excuse me, the moves are much more incremental, two basis points or so and this was a dramatic move and i think it's telling you when you look at the market as a forward indicator and how it is viewing the fed's actions and how it ties into the valuations, they're not aligned. julia: and the speed is critically important. account economy handle it as you said? this is the point. i have a great chart once again
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, kind of get over it in a way, when you have 3% nominal growth in the united states and you see this chart, that pops up so you can see, the white line shows you nominal g.d.p. and the 10-year rate here and the gap here between these two is pretty huge. at the point when it starts to close, then you have a problem and the red lines here are recession and nathan, to your point, the economy can handle it. nathan: categorically the economy can handle it. i think that's very clear. there's a fair amount of momentum in the consumer sector we saw yesterday in the retail sales report. the business sector is strong. the labor market is doing well. this i think is really part of the healing process and yes, it's the highest yield in six years but over the last six years the economy has been weak and now we're finally at a place where it's starting to improve. in my mind from a macroeconomic perspective, this is good news.
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so the economy can handle it. can the consumer? david: can the home purchaser handle it? we had the head of the principal financial group on recently and this is what jim had to say if we went above 3.5 or above. jim: if rates backed up to two or three basis points which i don't think they will but if they did it would kill the housing sector stone dead and provoke a recession. i don't think the u.s. housing market could take much more than a 3.5% 10-year yield and continue functioning well. david: that's dramatic, 3.5% and we have a recession. romaine: that's a bit dramatic. julia: come on. romain: we talked to a lot of market participants and they're not aligned and the economists are more optimistic and probably for good reason. the bottom market tells you the curve will invert. the equity market tells you we could be headed to not so much a recession but a correction in
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the market and they view as economic fundamentals. there is a disconnect. i'm not sure who is right but i look at what the market tells me. david: you said 18 years with the fed and before you were undersecretary treasury, you watched it through history. when there's an disagreement with the economists and market, who tends to win? nathan: i'd say on that one i might be a little biased and fall with the economists. but what the bond markets are telling us is that over the last five or six years, the fed has put an extraordinary amount of stimulus in the system and the economy hasn't responded and now we start seeing rates rise, whoa, what's going to happen next? their caution is based on what they've been trading the last five or six years. and i think really the jury is out as to who is right. julia: that's why this u.s. administration is talking about further spending and the tax cuts to ensure consumers are wealthy. bring it back to corporates, too. i look at the latest loans, the
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financial conditions aren't tightening to any certain degree for the corporates and they're cash rich and don't need to worry about borrowing, is this not surely a key point, too? nathan: absolutely. when i think of the macroeconomic outlook, no question is more important than what are the corporates going to do with that cash? and if it goes into investment we might see higher productivity. and that in turn could allow the cycle to continue for several more years, notwithstanding the tightness in the labor market. so i think that is the central macroeconomic question, what are they going to do with all this cash. david: one hopeful economist. you're making me feel so much better. bloomberg's romaine bostic and nathan sheets will stay with us. tune in to bloomberg television this afternoon for an exclusive interview with james bullard, st. louis fed expert coming up
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at 1:30. and asia's biggest stock defies fears as outside spending would hammer largens on china's largest social network company next. and we want to recap the macy's earnings because they're moving markets now. the macy's beat on earnings per share and beat on same store sales and raised their outlook and it's over 10% now and i'm told it is taking other department stores up with it. good news for macy's finally. this is bloomberg. ♪ ♪
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kayley: kailey: this is bloomberg with your news flash. the rights may be sold for
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crestor. the british drugmaker is raising cash by selling to raise money for patents. it could raise $1.5 million in the sale. a tablet is coming out to challenge the ipad. the company will release a cheaper version of the tablet in the second half of the year and cost about $400. and china's most popular social network tencent posted quarterly earnings that beat estimates and jumped 61% in earnings and the number of users exceeded a billion for the first time and it owns the giant wii chat platform. that's the headlines. back to you. david: we tend to ignore it because we're in the west and talk about-face book and google. julia: the dominance of the tech sector for the asian-pacific, we talked about it a lot of times. david: and the dominance of
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that throughout the country and touches hundreds of lives. julia: and macy's have come out with a new strategy in china as well that continues to sell products on alibaba. david: they talked about moving to china and now might have the money. the country is opening up the financial markets to global investors. msci announced a list of a shares to be announced to the major emerging markets indices beginning june 1. with us is nathan sheets. you really know china. you spent a fair amount of time there and know it well. are they genuinely opening up to investment, is it real? nathan: the chinese the last six or eight months have taken some steps particularly to open up the financial sector of foreign investment. we're hear building that. and in addition i think it's important as you highlighted that many of the key indices
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are adding chinese names and think that's significant. but more deeply, more profoundly, there is still a long way to go in ensuring a level playing field for u.s. and other firms on the chinese market. and for outside firms, for foreign firms to have the same access to china's market that china has to western markets. julia: taking out of the asymmetry, we talked about china and tensions in italy and the populism and these are two of the scenes you tie into your report and we look the a the signals they're sending and how investors need to think how they invest because of these dominant things we're seeing globally. nathan: absolutely. many of us believe that globalization is inevitable and is driven by these forces that
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simply over time are going to become more and more intent. but i think what we're seeing in a lot of countries, arguably italy and perhaps the united states and the u.k. is nationalist voices saying slow down here. is globalization really, really good for us? and so if kicking off intense political debate and at the minimum, i think that globalization is going to have to be rethought and softened in certain ways to ensure those games are spread throughout the ublic. david: there are two as wets, one with respect to goods and commerce and the other inflation because you see barriers go up when it comes to elections and whether china will allow social media in and we're having second thoughts in the united states, too, about social media. nathan: blocking the free flow of goods and services is
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ill-advised but something that can be done. blocking the flow of information is much more difficult and it leaves me worried if we're in societies where we're not willing to hear what other people think. you know, the flip side of that is you have to worry about public safety and how do we balance the free flow of information against the necessary safety of the public? that's a hard question. i think what we're struggling with is the society. julia: information flow and capital flows and reshoring the tax rate as we've seen. and how do you advise clients ultimately and what are you saying in how they have to approach the portfolio to incorporate huge trend shifts you're talking about here? nathan: on the one hand my feeling is the portfolio still very much needs to be global. but on the other hand, investors have to think about
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these geopolitical risks and these national kind of risks. the national political scene is more of a wild card, i would assert in many countries including in advanced economies that was a decade ago. nathan david: does it mean you need to hedge global. you can go with internationals but better have domestic no matter what happens with trade or information flows. julia: and hedge volatility as well. nathan: all those points are absolutely correct. at the end of the day i think what it means is we have to be diversified. diversification is likely the best for these risks. julia: nathan sheets is staying with us. coming up, says la -- tesla's board is under fire. we'll discuss this next. this is bloomberg.
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julia: tesla's board coming under more criticism. the second biggest proxy advisor is calling on them to appoint a independent chairman, defining the roles elon musk has held the last decade. the question is, is musk listening? >> i think a legitimate question and honestly i'm dubious to just how much this criticism is going to amount to anything in a couple weeks when we have tesla's annual shareholder meeting but certainly fascinating to see an investment group come out last week and say these three directors that are going to be voted on should be opposed by shareholders and a few weeks earlier we had a small individual investor come out and say this company needs an independent chairman. there's a long history of tesla facing some real criticism over its board and the lack of
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independence on its board as primarily comprised of people who have long ties to elon musk in personal and professional relationship with him and there's real questions about how much they can hold elon musk to account given the personality, given the role he plays in the company and just how much the value of tesla is sort of in mesh with how much people think highly of music -- of musting. -- of musk. david: adam jones is a respected analyst we had on friday and he was expressing some reservations and had been very bullish given what mr. musk said at the earnings calls and listen what he had to say. adam: we don't think tesla is a great investment and may not be a good short either. we're comfortable to equate. david: yesterday he took it down a whopping 80 bucks to 376 to 291 his target price on the
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stock. are people really starting to raise fundamental questions about elon musk and where he's going? craig: i thought adam's report yesterday was really interesting because one of the things he tried to make a point on was the idea that the model 3 has fundamental structural issues and if that's the case it's really problematic for tesla. this is a company that really hyped the model 3 as -- let's face it, it was the first sort of mass market car and was going to be $35,000 and it was going to sell to hundreds of thousands of people. we saw a few years ago people lining out the door of tesla stores to put down deposits. if they really have structural issues that are going to keep them from making that car and selling that car profitably, they're in real trouble because they do have sort of a period of time here before they'll have their next big product, the model y. they're talking about maybe having that by 2020 but as we know, we can't necessarily set our watches to the dates for
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when new products will land. julia: either you love it or hate it. there are shorts out there that are extensive and we can see it by looking at the nasdaq numbers as far as the stock is concerned. does any of this resonate ultimately with elon musk and ask you the question is george soros shortening the bond? craig: i think i saw a small position in the bonds and unclear whether that might an hedge against the short but you definitely are seeing the shares, they've been in a holding pattern for a year now. david: we're moments away from housing starts numbers here on bloomberg. erg. retail.
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under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. julia: this is "bloomberg daybreak." not getting much indication as far as futures are concerned. we are flat lining at this moment after a steep sell-off in yesterday's session and have
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been falling for three weeks, the bond markets the drive we saw in 10-year yields and also europe, the story, too, weakness in the italian market spread widening in italy as well amid bonds with alarming signals we're hearing from the potential coalition talks going on right now. david: housing costs were out and down more than forecast. down. and the forecast was 110 and there was an adjustment up from last month and a reduction of 3.7% month over month. so housing starts are coming in a little bit soft here, you'd have to say. julia: nathan sheets still with us. what do you think? nathan: there's a fair amount of volatility in these numbers month to month so i wouldn't be inclined to get too concerned about any given month data. but with mortgage rates rising, e'll have to watch and see
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what the elacticity is for demand for mortgages. my sense is that the push from the underlying strength of the economy is likely to be sufficiently powerful to keep the mortgage market, the housing markets strong for the years ahead but there's a risk there. david: what i have trouble with is prices are going up and with prices going up you'd be increasing fly but yet supply isn't meeting the demand. why is that? nathan: the labor market is tight. i think home builders are telling us it's really hard to find qualified skilled labor and given that it's hard for them to build houses. julia: millenials accounted for just over 35% of home purchases in 2017. that is a fascinating figure. talk about the millenial impacts on this figure.
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nathan: one of the great questions of this recovery has been why is household formation so low which then feeds over into low housing start. demographically one would think a $1.4 million to $1.5 million annual pace of housing starts is still above where we are and is likely to be demographically sustainable and given how weak we've been for a while with lots of these millenials living in their parents' basement that there would even be some overshooting that 1.4, 1.5. so in principal there's quite a bit of upside from millenials but g families and homes we have to wait and see whether that meshes with the mackeo environment. david: we turn from houses to oil. the energy department cut the oil demand growth from 2018
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after surging oil prices slowed down consumption. joining me is the head of the commodity market strategy and nathan sheets will stay with us. thanks for being with us, first of all. were you at all surprised at this point, is demand responding to price? harry: not entirely surprised. the economic outlook is still solid for now despite a bit of softening in the p.m.i. indicators in the first quarter but the international agency said you can't have this price increase year over year without some kind of negative impact on demand. nonetheless the outlook still remains robust at 1.4 billion barrels a day year on year growth and i think in terms of the oil market, we're still looking at a market driven by supply issues rather than demand issues. so inasmuch as the i.e.a. has trimmed the forecast the bigger picture remains what happens with iran and opec and what
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they'll do now they achieved their famous five-year target. david: what about oil prices has the i.e.a. used to make predictions and analysts said it could hit $100 and what will that do to demand? harry: in terms of the i.e.a. projections they have to remain neutral and uses what the future curve is indicating at the moment of the forecast. in terms of the forecast of analysts like myself we tend to take all these various factors in account and need to make a call. right now what we're seeing is at least for b.n.p. paribas, a extension of supply cuts in 2019 as saudi arabia pushes the agenda away from inventories to promoting cap ex-so presumably we need a higher oil price so means maintaining the higher cuts this year and extending them into next year and what happens to iran now the u.s. has pulled out of the nuclear agreement? how much actual exports will we lose? these are the considerations
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keeping prices upbeat. julia: are we underestimating the illustrate pictures of venezuela? the latest headlines with conoco phillips given permission to seize assets and other companies whether or not have been given permission are looking at the situation in the country and wondering how best to protect themselves in that region, too. it's curtailing the refining capacity surely of venezuela beyond even initial estimates surely. harry: yeah, you raise the biggest wild card as far as supplies are concerned what will happen with venezuela and that's when producer reports are formulated and venezuela also oil production was slightly over 1.2 million barrel as day or thereabouts and currently is producing 1.4 million barrel as day and we've had a collapse in venezuela given the very least a very challenging conditions financially, economically in the country, will they be able to maintain production even at these levels and that's a big uncertainty that was
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highlighted in the i.e.a.'s report this morning. if we continue to see production drops in venezuela the supply picture gets even tighter given everything else going on and that lends itself to the higher price forecast you were mentioning earlier. david: is it a demand story or supply story? nathan: some of both. global demand for oil is strong, consistent with the strength of the global economy. but ths a lot going on on the supply-side of the market for venezuela and iran, the kind of risks we've talked about. opec has been more cohesive in its restraint than people would have expected. and as oil prices rise does that continue or have they let up? the other key development is in the background u.s. shell oil is pumping. this is a great opportunity for the u.s. oil sector and supply from the united states is increasing significantly.
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not enough to prevent oil prices from rising but without that they would have even risen quite a bit more. david: it's a great opportunity for shale producers but will they take advantage of it given problem with pipeline and getting supply to the market? harry: i think you made the point right there, the logistical bottom we witnessed in the u.s. deflected in the discounting of w.t.i. at midland in the production area of the basin versus w.t.i. in houston, these bottlenecks essentially will prevent incremental upward provisions for the u.s. supply forecast, not to say the u.s. supply growth will be strong this year and next year but until such time those bottlenecks are resolved, it's unlikely producers will go out there and drill that much more because if you can't get the oil from the field to the distribution refining centers or export terminals there's no point in drilling. so i would say there's a strong increase obviously this year and in u.s. oil supply in
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excess of a million barrel as day year on year and is somewhat what opec is doing in terms of supply restraint but more importantly i think the u.s. will mr. a greater role in terms of oil price formation globally when you see that export capacity double in 2019, allowing more u.s. crude to reach markets such as europe and further away in asia such as china. david: ok. harari -- harry and nathan, thanks for spending time with us today. coming up the state of consumers, are those price cuts and rising wages translating to spending? you can turn on your radio and listen to tom keene 7:00 to 9:00. "bloomberg surveillance" can be heard in boston, the bay area and washington, d.c. and all across the united states. live from new york, this is bloomberg.
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kailey: this is "bloomberg daybreak" in the hewlett-packard greenroom. coming up, an exclusive interview with the st. louis fed president, james bullard. david: tiffany financial is in the business of providing credit cards to consumers buying retail so at a time there's a retail evolution or revolution happening, i asked synchrony c.e.o. margaret keen what it meant for their business. synchrony identifies with retail credit. how dependent are you on the health of retail because there's talk of retail going through a fundamental transformation in this country.
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meredith: it's an exciting time and yes it's an evolution or revolution however you want to categorize it but the most important part for us is since we've been through many different cycles in retail, you know, we really knew coming out of g.e. the most important thing for us was really to jump on to the technology aspect of where retail is going. so right out of the gate we invested in mobile, digital and have been doing that now for the past three years. and you know, one of the interesting things for me when i was part of g.e., i had the opportunity as part of one of their programs they do to spend some time out in silicon valley and it was very eye opening for me and i saw how particularly at stanford university students were really working in the engineering school and how they were coming up with new ideas and how they were working and if you look at how we used to do our programs, you'd go in a cubicle and you couldn't use a head set at g.e. and you know, we'd sit in the cubicle and
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take a 21 or 22-year-old and that's how we told them to work and i came back from that visit and it was before we split off from g.e. and said hey, we've got to change the whole way we're thinking of leveraging talent and technology and we created something called the innovation station which we started in stanford, connecticut, 100% focused on digital and we've been able to accelerate what we would not have been able to do under g.e. just because of the fact this became an area where we said in order for us to be a part of the future of retail we have to help our retailers get up to speed on technology and we can play a role in that. david: at the same time, your business can only be as strong as your customers. both the people borrowing money to buy things but also the people selling things. there's been some deflationary effect because of amazon and other digital advent, does that put pressure on you on margin? margaret: no, it really doesn't because if you think about how customers shop, even if in
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cases where we're seeing a reduction in brick-and-mortar, the reality is probably most of those stores were not generating the volume the retailer particularly wanted and we're capturing that volume online. so i think for us, it's actually helped us even become even more laser focused on what we needed to do from a technology perspective so in addition to digital the other big area we invested heavily on has been analytics and big data and really getting the infrastructure right around that so that we can help our partners combat some of what amazon has been able to do in terms of how they have this ery big circle when you shop they see what you're looking at and see what you're purchasing and by us helping build out the data we help our partners do the same thing. david: part of any interview with margaret keane synchrony financial c.e.o. basically their role is not just providing credit cards and credit but helping the retailers move in the digital
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age. julia: reinforcing to everybody here and the point she made about big data and the sheer volume of data they're collecting not just to facilitate their business but everybody else, too. david: help the retailers sell more online. you can see more of my interview on "big decisions" airing :30 p.m. eastern time. now we want to continue on the subject of retail, big week for retail earnings. we have home depot yesterday and earlier today macy reported a standout quarter and closed the week with wal-mart, jcpenney and nordstrom and as we get a read we continue to focus on the different aspects of the group on our retail therapy series and today we'll look at the health of the consumer followed by commerce on thursday and end the week. ith us is a company partner in retail practice and another expert who covers retail space
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for bloomberg. s margaret keane right the retailers can move in the digital area? >> we feel there is room for digital retail and we talked about what's happening with e commerce but 80% of sales happen in a physical retail store. and as we look across the retail landscape we see people improving their business and being successful in this environment. we see really four things retailers who are successful in this environment do. first they create a retail store experience and give her a reason to shop. for example if you were to go to alta or flora, it's an experience to learn and explore and try product and they've been successful in sending off the amazon threat for that reason. the second thing is create a
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compelling loyalty program and build loyalty with her and make her shop with you. to use the example of sephora, the beauty insider program or carter's, they have a program that's been successful. , there is a special relationship with the retailer and consumer. we've seen products be a big provider, trader joe's and the like. in our view the most important defense against amazon is really connecting and using the physical store. the store is a hub and a great opportunity to connect the digital and physical experience. buy online and pick up in the store and reserve online and try on in the store and that gives consumers the convenience and the opportunity. julia: the omni channel and amazon recognizing the store.
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>> you see retailers adding experience like hospitality getting people to come in and maybe eat something and buy something and the end fulfillment she spoke about, buy online and ship to store and pick up from the store. meld those and buy whatever you want and also pick it up and get it how you want it. julia: you also were broken down by income group and how healthy and what drives individual consumers. how healthy is the consumer. even if you look by income bracket what are we seeing in terms of confidence? >> we think about it in three, the lower income, the aspirational and the affluent. the lower income is households of less than $50,000 and their spend is driven largely by wages and wage growth has been strong, weekly wages have increased at 3%.
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that second aspirational group, their spend behavior is driven by home value and home value is up 8% and that final group, the affluent group, these are folks 20% of the population, the 40% spend and for that group it's the value of their financial assets which is also appreciated nicely over a long period. so in totality, the consumers help and reason to be optimistic here, all three segments have been the underlined drivers of the economic behavior. david: which retailers are best positioned to take advantage of that segmentation? >> she mentioned home value and yesterday home depot reported and was softer than people expected but because of whether april was very cold and they've seen a resurgence in may. i think you'll see that continue to happen as home price appreciations continues and even if there is an affordability issue, the average age of after home is probably over 30 years old so i still think you see strength in that sector.
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>> talk to me how much this is credit fueled? julia: we are in a rising rate environment, how much of this is dominated by credit and is there an element of cautiousness that filters into your thinking as a result of that? >> there's always a reason in this economic environment to be cautious because of the reasons you described? where we get comfort is a strong wage growth and strong underlying growth in home values and there are some economic fundamentals that are strong but always seen as cautious. david: i talked to margaret keane about credit and she said absolutely we're seeing credit grow with more borrowing but we're not back to normal yet and we've been in a very artificial period. >> that's true and we're nowhere near the peak but you have to, cautious and watch the
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change and look at auto loan delinquencies and auto home debt is very high and for many big purchases it relies on credit and a lot of retailers drive revenue from this credit so it's something to be aware of and particularly on the low end with gas prices rising we may not be able to get credit so something to keep an eye on. david: as you look at the retail environment and we're reminded of the wal-mart acquisition of flip card in india. how much will we see of that the traditional as well as retailers moving aggressively in the digital world? >> you have to step back and think about the market context here. if you think of how much amazon has spent on technology to create the experience they have, it's something like 12% of sales. traditional retailers spent more like 2% sales and there's really a gap that's driven on this very, very hard to close because as we know amazon is not sitting still so some of these acquisitions either in the case of flip card entering a high growth market quickly
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but in many instances it's really to try to close the gap and get the talent and the technology expertise to try to race against -- ulia: a great segment. thank you for joining us. coming up, a top lawyer takes a fall. more on what i'm watching next. and remember, bloomberg users, you can interact with the charts shown over the course of e programming and browse charts. can you catch up on key analysis. you name it, we have it. aamericanning markets, can the economy stand 3% yield and short for the 10-year, we have it for you gtvgo. this is bloomberg. ♪
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julia: david, this is another "what we're watching" novartis general counsel is stepping down and revealed the $1.2 million worth of payments made, the corporate scandal and fallout from this continues and of course novartis top legal counsel is the first victim and the new c.e.o. obviously scrambling to address this. wasn't his job, wasn't there when this originally happened but did get the managers, 5,000 of them, in a room to talk about this. david: and his predecessor on whose term this happened said they agreed to pay $1.1 million and had one meeting and said it was worthless and walked away from it. you have to turn to your general counsel. i was a general counsel and had government relations under me and i would have been fired for this. hire somebody for $1.1 million and didn't talk to the guy? julia: how concerning, you haven't even met them. let's look at the markets as we
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head towards the open. the futures are tilting slightly lower after the losses we saw yesterday. keep an eye on the 10-year rate and it was an acceleration that killed turbulence yesterday and the dollar stronger. david: coming up on bloomberg markets, the open, greg peters and chris heisey of bank of america global wealth investment management, live from new york, this is bloomberg. . ♪ mark -- jonathan: 30 minutes to
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the start of trading. this is the countdown to the open. ♪ jonathan: equity markets looking
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for a firmer footing as 10 year treasury yields stabilize near 2011 highs. bonds waking up to political risk. inulists in it it it -- italy -- 30 minutes from the opening bell. futures negative four points on the s&p 500. a weaker euro, euro-dollar back to 117.68 and treasuries find a , 3.0 6%. following a selloff, the push on the u.s. 10 to the highest level since 2011 and investors debating what higher rates mean for the markets. >> rising rates can actually fight into a market and we are seeing that today.


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